The Nigerian Economy and COVID-19

Let’s make a simple Analogy.

Adam earns N100,000 monthly which makes it N1.2Million Annually. After all deductions his total annual income comes to N1million, then he took a loan of N1.5million for 24months @ 23% interest to be paying N76,875 monthly out of N100,000. Don’t forget this N1.5Million loan he took is to use to pay rent to his landlord N500,000 for last year’s rent, buy new TV N200,000, repair his car N200,000, pay his child school fees N200,000 for the first term, then, from it he paid some of his debt of N200,000. He then used the remaining N200,000 for family upkeep and other small important projects. Remember all these expense are for the first year, his loan is for 24months.

Adam’s projection while taking the loan was that his salary will be increased or he will be promoted before end of the year, so that he can reduce the impact on his salary. Based on this, he bench-marked his next increase and upgrade income to N150,000 if all things work as planned. So he has planned that his family will manage and can cope with the remaining N23,125, this will cover transport, other monthly expenses like electricity, health etc.

He has no savings, but has other opportunities to increase his income. However he prefers tasking and borrowing from his siblings and other friends to meet up urgent needs. Though he has been working for three years now, he has refused to upgrade his skills. He always thought that he has the best job and that he would always grow on his job.

Suddenly come March of the same year, the economy went down; organisations gave people option to either cut their salary or be sacked. Adam was devastated with the news, now he earns N77,000 and not certain he will be able to meet other obligations in the near future, but he is so confident that things will change.

If this talks about you, this is exactly the state of Nigeria Today, so brace up and have a contingency plan.

Before COVID-19 spread into Africa, the Buhari led government have already made all arrangements to borrow over $23Billion Dollars (N9Trillion at current exchange rate) waiting approval from the senate in early March 2020( though suspended for now). This borrowing would be sourced from creditors expected from the Islamic Development Bank, the African Development Bank, the World Bank and creditors in China, Japan and Germany. Remember with these borrowing comes interest servicing which could take over 76% of our revenue yearly by 2024 according to IMF warning. Just last week S&P Global changed our rating from stable to negative (which is towards the junk territory) this means Nigeria’s credit worthiness has gone down in lay man language, you might say that’s their business, but this means countries and institution will see if you have the capacity to repay any loan before they give you money, ask countries like Venezuela and the rest.
read more nairametrics.com

Now Nigeria has not been able to get any form of Loans, the only likely place to borrow money immediately will be China, and you know China? They are gaming to have control of the world economy and 5G and Africa is a good place to have control while the rest of the world is fighting COVID-19. Nigeria bases its budget on income from crude oil, in last 3-months the bench mark has been changed from $57 to $30 and now price is hovering around $20/barrel what will the bench mark be again?

Nigeria is currently desperate, and will do anything to cushion the incoming impact on the economy.

A lot of businesses are going to be impacted negatively by the time we come out of this COVID-19 epidemic, but God watches over his people.

Things likely to happen are mass retrenchment of workers as government and businesses will not be able to pay salaries, already government (both state and federal have arrears to pay which they also plan to use part of the loan for) so don’t pray to be at home beyond 30days in Nigeria, government does not have money for stimulus package like the US and Europe, the money the government want to borrow will not come anytime soon, a total lockdown means, loss of job and close down of businesses.

This is a time we need a very strong and firm leader with insights and undying love for this country. It’s not time to be supporting party or ethnic affiliation. It’s time Nigerians must work together as one against the political class who is not thinking of Nigeria development and sufficiency. We need to develop other sectors aggressively and forget oil completely if the country must survive the next 10 years because Nigeria is broke as a country.

The government cannot sustain any form of lock-down for more than 4 weeks without a negative backlash on the economy with heavy reliance revenue from Oil and an import based economy.

Foreign direct investment has almost come to a halt, foreign remittances to Nigeria has dropped drastically. Currency has been devalued even though the Central Bank of Nigeria(CBN) said it’s repricing.

So Nigerians please brace for the impact.

Finally I want to use this opportunity to encourage as many as believe that God watches over his people. This write up is to help us not to be ignorant of the times, if I write all I have in mind, this will turn into a book; perhaps I will do a video to clarify some things I have written here. However we must more at this time look up to God for direction and pray for wisdom for our leaders. Everyone of us needs direction from God on what and how to go about this season. Don’t stop praying for the world against COVID-19, in all, be strong and don’t give in to fear.

To your Success

Author Profile

Lawrence Obi

Lawrence is a Cards, Payments, Project Management and Sales Expert with over 16years in the Financial Sector. He is passionate about Excellence, Leadership and Innovation, currently chasing interest in digital Payment solutions, blockchain technology, financial Inclusion & tech startups.
Author of the book, Discover, Develop, Deploy
https://www.amazon.com/dp/B083PSNRYY

Lawrence has founded several businesses including a Licensed Fintech in Nigeria. He loves writing and sharing knowledge with his audience.
You can reach him on any of his social media handles for enquiries and collaborations.